Republican presidential candidate and former U.S. President Donald Trump addresses attendees at a campaign rally at the Johnny Mercer Theater in Savannah, Georgia, September 24, 2024.
Brandon Bell | Getty Images
President-elect Trump’s pledge to impose sweeping tariffs on all goods entering the United States could wreak havoc on European automakers, with the crisis-stricken German auto industry seen as particularly vulnerable.
Trump announced in a campaign speech in late September that he wanted to transform the German auto giant into an American car company.
“I want German car companies to become American car companies. I want them to build factories here,” Trump explain In Savannah, Georgia. He added that the word tariff was “one of the most beautiful words I have ever heard” and was “music to my ears.”
Trump has since announced plans to impose new tariffs on China, Canada and Mexico, one of his first actions after taking office. These measures include a 10% tariff on all Chinese products entering the United States and a 25% tariff on all goods from Canada and Mexico.
Europe was not mentioned in Trump’s first tariff announcement, but EU policymakers may worry it is only a matter of time before the president-elect turns his attention to the 27-nation bloc’s auto industry.
For Germany, the prospect of U.S. tariffs on European cars comes at a time when its top original equipment manufacturers (OEMs) are already struggling.
Volkswagen, Mercedes-Benz and BMW have all issued profit warnings in recent months, citing a weak economy and sluggish demand in China, the world’s largest auto market.
Rico Luman, senior economist at ING Transport and Logistics, said the German auto industry appears to be severely affected by Trump’s tariff threats.
Germany is by far Europe’s largest exporter of passenger cars to the United States, with exports worth 23 billion euros ($24.2 billion) last year, according to data compiled by Eurostat and ING Research. This accounts for 15% of total German exports to the United States
Luhmann said tariffs on German automakers could make an already bad situation worse.
“It’s the heart of manufacturing, right?” Luhmann told CNBC via video call. “So the automotive industry is ultimately linked to the steel industry and the chemical industry, so the entire supply chain is involved.”
A German government spokesman declined to comment when contacted by CNBC.
Volkswagen, BMW and Mercedes-Benz
While some analysts choose not to believe Trump’s pledge to transform German auto companies into American ones, they warn that additional U.S. tariffs will exacerbate challenges facing the global auto industry.
“This was campaign rhetoric, but there will be some pressure on imports, whether it’s through tariffs or some other kind of unilateral action,” said Michael Robinet, executive director of S&P Global Mobility Advisory. CNBC via video call.
“One of the concerns that many economists, myself included, remain concerned about is that the U.S. unemployment rate is still essentially hovering around 4%, so trying to push a lot of extra jobs in the U.S. is going to be problematic,” he added.
On March 20, 2024, the employee parking lot of the Volkswagen Assembly Plant in Chattanooga, Tennessee, was filled with Volkswagen vehicles.
Elijah Novelage | Elijah NovelageGetty Images News | Getty Images
In addition to Trump’s proposed tariffs on China, Canada and Mexico, the US president-elect has also vowed to impose a package of tariffs. A 10% or 20% tariff is imposed on all goods entering the country. However, it is unclear whether this commitment will become U.S. policy.
“We are evaluating Trump’s proposed tariffs,” a Volkswagen spokesperson told CNBC via email.
The Wolfsburg-based company said more than 90% of the cars currently sold in the U.S. market are produced in North America and meet the criteria for duty-free treatment under the United States, Canada and Mexico Free Trade Agreement (USMCA).
Still, Trump’s proposed tariffs on Canada and Mexico are seen as ending the U.S.-Mexico-Canada Agreement.
Meanwhile, Mercedes-Benz said it has more than 11,000 employees in the United States and builds passenger cars and trucks at 12 major locations. “We look forward to a constructive dialogue with the new U.S. administration,” a spokesperson told CNBC.
BMW declined to comment on the prospect of Trump’s tariff threat. The company has about 30 production sites in 12 U.S. states, including the world’s largest single BMW production plant in Spartanburg, South Carolina.
Shares of Volkswagen and BMW are both down about 23% so far this year, while Mercedes-Benz has fallen about 13% over the same period.
‘Everyone needs to be prepared’
“Trump wants to impose more tariffs, so everyone needs to do that,” Julia Poliscanova, senior director of vehicles and electric vehicle supply chains at the campaign group Transportation & Environment, told CNBC via video call. Be prepared.
“I think it’s very important for Europe to continue on its own course, whether it’s on the European Green Deal or the electrification agenda. Trump has the potential to make the United States fall behind on a lot of clean technologies and electric vehicles, so that’s an opportunity for Europe actually It’s all accelerating at the same time,” Poliskanova said.
“This will be bad news in the short term for German carmakers, for example, but it’s important to understand that this is how the world is. We just have to do what’s best for Europe and the interests of European industry – and there’s no slowdown ,” she added.
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